Following the Market News

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Today's Rate Volatility: HIGH What happened yesterday? Mortgage backed securities (MBS) gained +111 basis points from Tuesday's close which caused 30 year fixed rates to move to their lowest levels since August 12th. Yesterday was all about the Fed.  And they shocked bond traders by electing not to taper at this meeting.  While our own internal survey showed that only 20% of over 4,000 originators expected a taper announcement, over 80% of bond traders and hedging operators did expect a taper announcement.  You can read their policy statement here: http://www.federalreserve.gov/newsevents/press/monetary/20130918a.htm So, the fact that they made no taper announcement was unexpected by traders and a shock to the system.  As a result - MBS shot up just over +80 BPS just after the FOMC statement was released and then another +25BPS after Bernanke's press conference. Many have thought that a taper was already fully priced into MBS and this was certainly not the case.  Some of it was - but more accurately a taper was "hedged" in to the market which did not show up in your pricing. The benchmark FNMA 4.0 coupon was trading at 107.46 on May 1st before the big sell off that has pressured pricing since then.  That sell off was only partially due to tapering expectations there were many other reasons for the sell off.  We closed at 104.03.  While that is a +111BPS gain from Tuesday, it is still -343BPS worse (even net of yesterday's improvement) from our levels in late April and yesterday's FOMC (in)action will not rally MBS to those levels in April. But we did get a welcome bounce and an improvement to your pricing.  We would have gotten even more of a bounce but the following statement from Bernanke is providing some friction to our bond rally: "Asset purchases are not on a preset course," Bernanke said. "They’re conditional upon the data. They’ve always been conditional upon the data. ... There is no fixed schedule, I really have to emphasize that. If the data confirm our basic outlook … then we could begin (to taper) later this year. But even if we do that, the subsequent steps will be dependent on the progress in our economy." Keep in mind that the Fed does not have to wait until their next meeting in December to take action.  The made it very clear that it is already part of their program that they can change the size and nature of their asset purchase program ANY time that they want. The stock market (as measured by the DOW) jumped +147 points AND MBS jumped +111BPS...once again showing that stocks and bonds are more often than not moving in the same direction. So the Fed surprised the markets and did not start tapering - what comes next? Looking at our chart, you can see that we are having a stellar day today since the Fed FOMC announcement that they would not begin tapering (reducing the quantity of Treasuries and MBS purchases that make up QE3).  The bond markets rallied on that news, and MBS is up over 100bps on the day - which is of course FANTASTIC for pricing.   But the question you have to answer is - will it last?  Or is this as good as it gets? If you subscribe to RateAlert as an Executive subscriber, we help you to answer those questions.  We also help you to share those answers with your Realtor partners, Consumers, and anyone else you like with our eMarketing Suite of daily and weekly commentary pieces that you get at no extra charge.  True set-it-and-forget-it marketing, including our new Daily Consumer Rate Forecast and Weekly Realtor Snapshot! Try Executive out today for 15 days for a dollar - and see what you are missing.  Let us help you navigate the rocky days ahead and win more business! What is on the agenda for today? Don't miss out on the mortgage industry's premiere insight and commentary. Subscribe to RateAlert Executive today and get today's lock advice, complete market commentary and forecast for today, and watch the full Morning Coffee Update video with Bryan McNee - all available only to our Executive subscribers.